By J. Bradford DeLong
Former deputy assistant secretary of the US Treasury, is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research.
In the online journal The Baffler, Kathleen Geier recently attempted a roundup of conservative criticism of Thomas Piketty's new book Capital in the Twenty-First Century. The astonishing thing to me is how weak the right's appraisal of Piketty's arguments has turned out to be.
Piketty's argument is detailed and complicated. But five points seem particularly salient:
1. A society's wealth relative to its annual income will grow (or shrink) to a level equal to its net savings rate divided by its growth rate.
2. Time and chance inevitably lead to the concentration of wealth in the hands of a relatively small group: call them "the rich."
3. The economy's growth rate falls as the low-hanging fruit of industrialization is picked; meanwhile, the net savings rate rises, owing to a rollback of progressive taxation, the end of the chaotic destruction of the first half of the twentieth century, and the absence of compelling sociological reasons for the rich to spend their incomes or their wealth rather than save it.
4. A society in which the rich have a very high degree of economic, political, and sociocultural influence is an unpleasant society in many ways.
5. A society in which the wealth-to-annual-income ratio is a very large multiple of the growth rate is one in which control over wealth falls to heirs - what Geier elsewhere has called an "heiristocracy"; such a society is even more unpleasant in many ways than one dominated by a meritocratic and entrepreneurial rich elite.
Now, even in thumbnail form, this is a complicated argument. As a result, one would expect that it would attract a large volume of substantive criticism. And, indeed, Matt Rognlie has attacked (4), arguing that the return on wealth varies inversely with the wealth-to-annual-income ratio so strongly that, paradoxically, the more wealth the rich have, the lower their share of total income. Thus, their economic, political, and sociocultural influence is weaker as well.
Tyler Cowen of George Mason University, echoing Friedrich von Hayek, has argued against (4) and (5). The "idle rich," according to Cowen, are a valuable cultural resource precisely because they form a leisured aristocracy. It is only because they are not bound to the karmic wheel of earning, getting, and spending on necessities and conveniences that they can take the long and/or heterodox view of things and create, say, great art.
Still others have waved their hands and hoped for a new industrial revolution that will create more low-hanging fruit and be accompanied by another wave of creative destruction. Should that happen, more upward mobility will be possible, thus negating (2) and (3).
But the extraordinary thing about the conservative criticism of Piketty's book is how little of it has developed any of these arguments, and how much of it has been devoted to a furious denunciation of its author's analytical abilities, motivation, and even nationality.
Clive Crook, for example, argues that "the limits of the data [Piketty] presents and the grandiosity of the conclusions he draws...borders on schizophrenia," rendering conclusions that are "either unsupported or contradicted by [his] own data and analysis." And it is "Piketty's terror at rising inequality," Crook speculates, that has led him astray.
Meanwhile, James Pethokoukis thinks that Piketty's work can be reduced to a tweet: "Karl Marx wasn't wrong, just early. Pretty much. Sorry, capitalism. #inequalityforevah."
And then there is Allan Meltzer's puerile accusation of excessive Frenchness. Piketty, you see, worked alongside his fellow Frenchman Emmanuel Saez "at MIT, where...the [International Monetary Fund's] Olivier Blanchard, was a professor....He is also French. France has, for many years, implemented destructive policies of income redistribution."
Combining these strands of conservative criticism, the real problem with Piketty's book becomes clear: its author is a mentally unstable foreign communist. This is an old tactic on the US right, one that destroyed thousands of lives and careers during the McCarthy era. But the depiction of ideas as being somehow "un-American" has always been an epithet, not an argument.
Now, in center-left American communities like Berkeley, California, where I live and work, Piketty's book has been received with praise bordering on reverence. We are impressed with the amount of work that he and his colleagues have put into collecting, assembling, and cleaning the data; the intelligence and skill with which he has constructed and presented his arguments; and how much blood Arthur Goldhammer sweated over the translation.
To be sure, everyone disagrees with 10-20% of Piketty's argument, and everyone is unsure about perhaps another 10-20%. But, in both cases, everyone has a different 10-20%. In other words, there is majority agreement that each piece of the book is roughly correct, which means that there is near-consensus that the overall argument of the book is, broadly, right.
Unless Piketty's right-wing critics step up their game and actually make some valid points, that will be the default judgment on Piketty's book. No amount of Red-baiting or French-bashing will help.
Copyright: Project Syndicate